Readers' comments

Caveat investor, home country rule, moral hazard, etc, etc.
What were the prudential banking regulators doing, the central banks of Iceland, UK and the Netherlands? Not enough, we see in retrospect.
Retail investors need to be protected, when they make conservative invesments and deposits, not when they make speculative bets far off-shore, as in the tulip and South Sea manias, remember those? Re-reading Kindleberger might be useful.

And the Investor and Depositor protection cannot be absolute and unlimited, otherwise there is no incentive to select good investments, with risk/return distorted.

Foolish creditors/investors invoking anti-terrorism rules is the XXI century version of "warships in the harbour" taking over the customs collections.
So what else is NOT new?

Regardless of whether UK and Dutch depositors were in fact mostly repaid, or whether it is a victory or a sham, one thing is clear:
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People, and countries, will now view EU rulings as being optional, with no force of law. A slippery slope indeed for the EU.

Now that the EU has rewritten its deposit insurance rules for banks in the union, in the future, it must be the taxpayers´ task to pay for the extravagance or whatever made the respective banks go bust. Now that is a very bad message for the banking system. The message from the new set of rules is: Do what you want, steal as much as you like, be it through bonuses or other ways, the public (taxpayers) will always pay, if things get out of hand. As for the Icesave case: There seems to be no loss for the governments of the Netherlands and the UK, unless they expected fat interest rates on the loans they volounteered to create. One could go on: Is it healthy to insure deposits so extensively as the new set of rulings depicts, since that could mean, that if other banksters (yes, the owners and managers of the Icelandic banking system were gangsters) decide to promise fat interest rates in exchange for peoples´ money, pocket the deposits and send the bill to the taxpayers, the EU banking union will shoulder the bill? What kind of a message is that? It is also worth mentioning, that the UK government refused to extradite one of the Icelandic banksters (Sigurdur Einarsson) from London for questioning by Icelandic prosecuters. And the money stolen by Icelandic banksters is probably mostly placed in London today, after a round trip through various tax heavens, some under the British crown.

You don't. Barings was bought by ING for £1 who took on all its debts. However this is irrelevant to Icesave as Barings was an investment bank - only the general public receive a government guarantee, not the shareholders or bondholders.

Iceland guaranteed all account holders of Landesbanki in Europe. They failed on that guarantee. That is all the market will take from this new bit of legalistic insanity from continental Europe.

CityBound, Iceland did not guarantee all account holders of Landsbanki. The Icelandic government was responsible for setting up a deposit insurance scheme, which it did. I suspect that many people who are baffled by the court's judgement, including the journalist at The Economist, have not read it. For those who would like to educate themselves on the matter: http://www.eftacourt.int/images/uploads/16_11_Judgment.pdf

Yes of course it did, via the EU passporting scheme all public accounts holders were offered the same government guarantee.
.http://www.eba.europa.eu/getdoc/364b9c1a-c8c4-4e84-8b20-1195707c08f9/CEB...
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Iceland's membership of the scheme was the only reason under EU law that it was allowed to accept account holders in NL and the UK at all.
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They should have all been treated the same, and they weren't - Iceland made an promise that it was impossible to keep (via the incomptence of its regulator).
This is why the courts judgement is so ridiculous - it is in blatant contradiction to EEA agreements at the time.

The second matter has to do with discrimination and that is a more complicated one. Had the funds of the deposit insurance fund been diverted to Icelandic depositors at the expense of other depositors it would be clear cut, but no such thing took place. I will concede that this part of the dispute was in question, but to say that Iceland guaranteed all account holders in Europe is incorrect.

Wrong. Iceland was required to set up an adequate deposit insurance scheme. Directive 94/19/EC says that member states are not "liable in respect of depositors if they have ensured that one or more schemes guaranteeing deposits.....and ensuring the compensation or protection of depositors under the conditions prescribed in this directive have been introduced". It is hard to argue that a deposit insurance scheme that had a standing fund of only about 1% of banks' deposits could be considered adequate for a country with essentially just three banks - unless the government accepted that it would back the deposit insurance scheme. Anyway, Iceland never denied the frequently published view (eg by rating agencies) that it would not stand behind its deposit insurance scheme.

Wrong? Not according to the court. If you take the text from the directive to mean that a deposit insurance scheme is only adequate in case it is able to cover all insured deposits in the worst case scenario, then we are simply talking about a full government guarantee and there would be no point in setting up a deposit insurance fund. The fact is that the regulatory environment was, and is, flawed.

Perhaps the Icelandic government should have made it clear that it was not responsible for the banks, but you will rarely hear government officials say things that might cause a run on banks.

The Icelandic case has shown the folly of highly leveraged banks being backstopped by the government. Without the perception of a government guarantee, the Icelandic banks would never have grown so large and everyone would have been better off as a result. That is not a message that suits a financial center, such as London. The emperor does not like to be exposed.

It depends what you mean by deposit insurance "fund" and government "guarantee". If you mean the standing fund of about 1% of deposits, then yes it was plainly inadequate, because it could not have covered the failure of one of Iceland's significant banks from its own resources, so you could argue that there was no point having one. But most deposit insurance schemes would expect to borrow to make the insurance payments, and the government guarantee becomes a matter of making a loan to the scheme (the US FDIC says something like it is backed by the "credit" of the US government). In general, the expectation is that the deposit insurance scheme makes the insurance payment almost immediately (the "paybox" function - see paragraph 4 of http://reservedplace.blogspot.co.uk/2010/03/on-thin-ice.html ), by borrowing and then recovers the outlay over time both from the liquidation of the bank concerned and the insurance premiums paid by the surviving banks. Obviously, the initial outlay was a lot of money for Iceland to borrow in international capital markets, which is why the British and Netherlands offered a loan. Unfortunately, the Icelandic voters were poorly informed, saw the headline number, assumed that they would have to pay it all themselves and voted no.

I suspect the truth is that Iceland just copied a European-style ex post funded deposit insurance scheme without really understanding what was involved. As the report for the Icelandic parliament explains, the Icelandic deposit insurance scheme was managed part-time by one central bank official, who did not have the time to attend all of the European discussion meetings at which such policy questions were discussed. Basically, Iceland is just too small a country to have experts in every service provided by a full-sized country, and deposit insurance was a service that they were unable to do properly. In my view, whatever the EFTA court said, Icelanders should admit that Icesave was the kind of hazard naturally faced by such a small country trying to go it alone, and should accept a moral obligation to repay British and Dutch taxpayers.

Anybody with more access to the facts please correct me - however, I understood what was happening as follows;
Firstly, the EFTA Ruling appears to have no "practical" consequence for iceland case, as Landesbanki(icesave owner) estate apparently had enough assets to repay the UK/NL government in the end, or to a high percentage. The British press has been very coy about details. So in the end, it was not a question of Iceland or its taxpayers need to pay for the deposit insurance sheme. One notable, but not debated point, it is now more than 4 years, a long time, till a solution was found.
Secondly, in 2008 the UK/NL gov's mainly wanted to avoid "contaigon" and "bought" the receivables of the savers. Again, no reporting about these repayments and "final" losses borne by the respective taxpayers........
What appears to have faild (amazingly, but positively) for the first time since 2007, is the unquestioned tranfers of liablities from private corporations onto taxpayers - upheld before a EU court, nonetheless. So judges have suceeded, where politicans failed........
Which has serveral ramifications, in part unrelated to the topic. Firstly, these are very bad news for the banking union, joint deposit sheme fans. Apparently, somewhere in the deep plumbing of international (EU) law there seem to be rules which "can" be used to upheld property rights, which makes "pass the parcel" much more difficult, unless everybody colludes. Mr. Draghi, are you listening? Any of the core governments - Angie please listen intently - to agree override these principles and putting more burden on their own populace - would be stupid, very stupid indeed.
Furthermore, the whole thingy becomes every more interesting from a game theory point of view - because the first to repudiate to "hold the bag" has a huge first mover advantage. Should be noted by everyone.
And finally, a related aspect. The current surge of the euro is partly due to everybody else threatening to print more than Draghi, and the (invalid?) assumptions of the market as to whether the core is willing/capable to "hold the bag" - thus being a very important sign for the stability of the Euro. Has anybody else noted the assorted dilemma for this hapless bunch of "saviours of the euro". If they allow the euro to surge and stay high, they faciliate the destruction of the euro (because exports will become ever more impossible for the periphery, the deflationary spiral will increase... as they will become ever more unable to compete globally) - if the euro is devalued, thus making it ever more expensive to import oil and thus stroking inflation (side effect - capital will flow from the periph, testing the willingness of the core to hold the bag (or not) to become ever more likely) - the euro will rip apart, although for other reasons.
Dammed if they do, dammed if they don't - loose loose, if you ask me....

You are correct. The assets in the Icesave bank, were enough to pay minimum deposit insurance. We (Icelandic taxpayers) were never in risk of having to pay for this part. However: We were offered loans from the governments of UK and NL. These loans carried interest. We will now not have to pay for this. But some of it will be paid anyway, by the Icesave bank (Landsbanki). So I think the governments of NL/UK will not loose any money.
We could have finished this whole case in 2009, but politics is politics, on both sides :) People in that business have to "show off" for their local voters. If this had been a problem between two big companies... well it would most likely have taken some 2-3 months to solve.

Britain and the Netherlands should not have had to rely on the Landsbanki estate for the share of the deposit insurance that should have come from Iceland - that should have been paid very soon after the deposits were declared "unavailable", and then Iceland should have joined Britain and the Netherlands in the ranks of the ordinary unsecured creditors. And had Iceland not cheated Landsbanki non-deposit creditors by giving depositors preference by passing an ex post facto law on the eve of the Landsbanki bankruptcy, the depositors and their guarantee scheme representatives from Iceland, Britain and the Netherlands, probably would have sustained substantial losses.

I do think that the British authorities could and should have done more to make their case to the Icelandic people on this issue. As it was, the referendum debates seemed to be based more on emotion than fact.

200. Moreover, as regards the second plea, the defendant argues that there has been no
discrimination whatsoever in the manner in which the deposit-guarantee fund
itself has operated. The two groups compared by ESA, depositors with domestic
branches and depositors with foreign branches of Landsbanki, have been treated
equally. None has received any payments under the guarantee scheme.

More a question - as far as I remember, Brown deceided to compensate UK icesave customers over and above the amount guaranteed by the Icelandic/(or British?) system?

So let's assume a generic customer of icesave had a GBP 100k saving, and got GBP 100k from the UK government, whereas he would have got GBP 20k under the islandic scheme and GBP 35k under FAS regime? (not sure the figures are correct, just to describe the situation).

So which amount has now been repaid by the estate of Landesbanki, the 100 plus interest for 4 yrs, or the 20 without any interest - or something inbetween? Which was it? How big was the UK gov loss on the 20k assumption, and how big overall?

Guessing based on what I read between the lines, the local icelandic customers were treated as preferred and paid by the estate, whereas UK/NL customers were treated as unsecured? Assuming there is some legalese around the transfer of obligations from Landesbanki upon declaring the deposits "lost" to the deposit scheme, how does it work?

In effect, the UK government decided to increase the "top-up" component of the deposit insurance from £35,000 to cover the full amount of retail deposits - £100,000 in your example. But this makes no difference to how much Britain claims from Iceland (€20,887) or the Landsbanki estate (since the British government is simply subrogated to the claims that would have been made for the amount of deposits over £35,000 that would have been claimed by British depositors. The British government should not have been at any risk of loss for the €20,887, because that was supposed to be Iceland's responsibility (see paragraphs 4 to 8 here: http://reservedplace.blogspot.co.uk/2010/03/on-thin-ice.html ). As it is, the British government will probably get all of their deposit insurance outlay back from the Landsbanki estate - ie £100,000 in your example - but without interest, whereas they should have received €20,887 of that almost immediately from Iceland. So it will not cost the British and Dutch much in the end. But only because Iceland is cheating the non-deposit creditors of Landsbanki, which I mention in some other comments here.

Iceland (the country; its taxpayers) didn't cheat anyone. It was not and is not the responsibility of Iceland to pay anything, ever. It was Iceland's responsibility to have the banks create the deposit fund between them, according to European rules. Which it did.
When the banks failed, the deposit fund was not big enough to cover all losses and subsequently paid no one. Neither foreign, nor Icelandic account holders. Make sure you understand that. The deposit fund has, to this day, not paid out a single krona.
The Icelandic government introduced emergency laws, creating government-owned banks, to keep a monetary system going, since there was no longer one.
Icelandic account holders were moved to these new government-owned banks, which did not compensate any account holders for loss of value of their savings.
In the meantime, foreign account holders are being paid out of the bankrupt estate of the bank, near to or completely the amount they were owed. Not just private account holders, but also institutions, local governments, etc.
What was the verdict of the EFTA Court: 1. Iceland (the country, the taxpayers) are not responsible for the private debt of the banks. 2. Depositors with domestic branches and depositors with foreign branches of Landsbanki have been treated equally. None has received any payments under the guarantee scheme.
The British and Dutch governments were free to implement their own emergency laws to facilitate payback of funds, but the perceived obligation they created for Iceland was just that: perceived. And that is all there is to it.

I agree that European law was not clear that states have any responsibility to make insurance payments, but Directive 94/19/EC does say that countries are only not "liable in respect of depositors if they have ensured that one or more schemes guaranteeing deposits.....and ensuring the compensation or protection of depositors under the conditions prescribed in this directive have been introduced". Iceland can hardly claim to have introduced such a scheme, since without government backing, the fund could never have compensated depositors of any of the three key banks in Iceland. But I think that was more of a matter of incompetence than cheating.

Where I think Iceland is cheating is when it comes to their use of the Emergency Law. Domestic depositors lost none of their deposits and never had to claim on Iceland's deposit insurance scheme because they were transferred to a new state-owned bank before the Icelandic bank regulators had formally declared Landsbanki deposits unavailable on October 27, 2008. However, as the EFTA Court acknowledged, Landsbanki collapsed on October 7 and the decision to transfer domestic deposits was made on the October 9, under an "Emergency Act" passed by the Icelandic parliament on the October 6, by which time the failure of Landsbanki was inevitable. In legal terms, the transfer of deposits was made ex post facto. This would be rather like a life assurance company that cancelled your cover when you had a terminal illness and then refused to pay when the policyholder actually died, on the grounds that they were not insured at the time of death. Whatever the EFTA court (comprising judges from Liechtenstein, Iceland and Norway) ruled, Icelanders can surely see the moral case against them here? The emergency law also gave priority to the depositors in the Landsbanki liquidation, again ex post facto. Note that this cheats bondholders who bought senior Landsbanki bonds on the understanding that in law, they ranked pari passu with the depositors (and were therefore unlikely to sustain losses in bankruptcy - like the recent nationalisation of SNS Reaal in the Netherlands), only to find the law changed to their disadvantage when bankruptcy became inevitable.

Incompetence, certainly. It is ubiquitous.
However, the court confirmed Iceland in its decision to create emergency laws as it saw fit.
The Icelandic government decided to protect its taxpayers, instead of the bondholders. Considering who voted the government into power, I would say that their loyalty is in the right place. Not to mention that there really was no other option in order to keep a monetary system in place. You quote that Icelanders' deposits were safe, except against massive inflation of the currency. Something that the foreign account holders did not suffer, since they are getting their deposits back equivalent to the value in pounds and euros.

Ubiquitous, yes, but I would suggest more likely in a country that tries to cover too many activities for the number of people in the country - Iceland's deposit protection scheme was run part-time by an employee of its central bank (note, from the public sector, not the private sector, as Iceland would like to present its deposit insurance scheme), who did not have the time to attend many of the European meetings at which deposit insurance policy was discussed. In my view, Icelanders should accept occasionally having to pay for such incompetence as a cost of their independence as a small nation.

Icelanders who kept their deposits in domestic currency presumably benefitted from higher interest rates representing a kind of insurance premium against such inflation - which is of course why so many Icelanders chose to borrow in Swiss francs and yen (which, according to the FT - http://www.ft.com/cms/s/0/6e9d69ea-6a06-11e2-a80c-00144feab49a.html#axzz... - were declared illegal when they turned against Icelanders - ie more cheating).

Given Icelanders' present whining, evasive attitude to their moral responsibilities, it is a joke that, in 2005, at the height of their boom, President Olafur Ragnar Grimsson declared that Iceland's "style of entrepreneurship breeds leaders who know they are responsible....they don’t hide behind an army of lawyers..." ( http://www.forseti.is/media/files/05.05.03.Walbrook.Club.pdf ).

We have landed in the realm of opinions and assumptions. You are entitled to yours, of course. I do not share them. In this case, Iceland was judged according to facts and was judged favorably. That really is all there is to it, whether you agree or not.

No, I am mostly offering facts above. If the court's judgment was supposed to be based upon such facts, it is a travesty, but what can you expect of a court comprising judges from the defendant, and even smaller and more financially-dependent microstate, and a country with close ties to the defendant. It would be like a court from Britain, Spain and Germany ruling on Iceland's mackerel quota. Sadly though, since there appears to be no mechanism for Britain and the Netherlands to challenge the ruling, that is all there is to it.

1. For what it's worth, Karel Lannoo, Chief Executive at the Center of European Policy Studies, believes an EU court would have come to the same conlclusion as the EFTA court. See http://www.vb.is/frettir/80659/

2. The Icelandic Central Bank and Icelandic pension funds where the 2nd and 3rd largest non deposit creditors, who lost out on the Emergencgy Law. This may not be much consolation to other non deposit creditors, but shows that Icelanders made sacrifices to make this deposit priority possible, not only for them, but for UK and Dutch deposit holders as well.

The alternative to "bleeding" the non-deposit creditors is to sacrify the deposit holders. The latter were essetial for the economy as a whole, and were therefore given priority. To take your "death bed" analogy, it was a case of choosing who to let live... when the resources were not sufficient to save every one. The choice made has not been contested by the UK and Dutch.

UK and Dutch taxpayerws and governements will also be glad about this result, should they ever face systemic crises.

3. If the Directive's intention was to have state guratnee on depostis... why did it not say so explicitely?

Who got mugged by whom? The thieves were Icelandic gangsters, that is true. Why they got away? You should ask the British authorities, since most of the Icelandic banksters now recide in London, save from the short arm of Icelandic law enforcers. And in spite of everything, most of the deposits will be returned to their rightful owners by the left overs of the bank gone bust. One question: If people decide to deposit money in some scheme which promises higher returns on their capital than normal, the rule of thumb says that people seeking the highest possible promised returns should know, that the higher promised returns come with a catch: They are not as secure as a normal bank deposit would be. This is atleast the message people should be getting. I am not familiar with, whether the new set of rules for deposit insurance in the EU, totally rids depositors of their own responsibility for their actions. Should that be the case, then a grave mistake has been made, which might cost taxpayers in the EU a lot in the future. The TE should address the dangers posed by the EU´s new set of rules concerning deposits´ guarantees. I look forward to seeing the TE´s article on that last mentioned topic, since I normally hold TE´s views in high regard.

Rubbish. The British and Dutch did not want the banks bailed out; they wanted, on behalf of their taxpayers, the part of the deposit guarantee that should have been paid by the Icelandic deposit insurance scheme. This has nothing to do with bailing out private banks; it is about whether the Icelandic taxpayer is going to compensate British and Dutch taxpayers for some of the deposit insurance that they have already paid out to cover a failure by a branch of an Icelandic bank.

Greece walked the line, and there are riots in the streets. It is falling apart adhering to obligations that it simply can't support, regardless of deals made by people who didn't give a sh*t what happened to the country.

Iceland has been praised for their handling of the situation by economists, and I'd say it's for reasons glossed over in this article.

For anyone who thinks this sham is a victory, think again. Icelandic banks are not going to be able to do business in the UK, or Holland or the rest of Europe or the US for that matter unless they can prove that this wont happen again (by fully capitalised subsidaries for example). Icelandic banks will be treated like Agrentinians trying to sell you a bond.

Short term victory, long term pain, well done for shooting yourselves in the foot for those stupid enough to vote down the second referendum.

You do realize the Icelandic banks, now owned by the gov't, have repaid 90% of what was owed? They are making money again and Iceland's finances have improved dramatically. Your comparison is not very accurate.

While you're right to point out that the defunct bank has already repaid 90%, this bank isn't actually owned by the Icelandic government, although it's thanks to the Icelandic government's action that depositors were given priority.

No you are wrong, Iceland is doing better than most EU country's today. you should take a better look at EU banks that can behave like as holes knowing that taxpayers bail them out. A bankrupt banks should go bankrupt.
voting down the second referendum is not a problem for Icelanders and not for savers. The savers get there saving from the Landsbanki assets, according to law.

To bail out bankrupt banks like EU is doing is shooting yourself in the foot.

I agree that bankrupt banks should be allowed to go under. However, their shareholders and non admin employees should suffer while their depositors need protection.
Everything you just said is correct but nonetheless this judgement is wrong.

I wonder if, after Lemann Brothers, American banks can do business in Europe? The financial losses feel the same, whether they were orchestrated by Icelandic or American banksters. And the Icelandic banks were a mixture of deposit taking banks and investment banks, a toxic mixture, which should not be allowed.

The Emergency Law that gives depositors priority was passed on the eve of Landsbanki's bankruptcy in the knowledge of what was about to happen, so it must be liable to challenge as an ex post facto law.

The Icelandic government did not leave the Uk depositors in the cold, even if it could not secure immediate access to their deposits. It granted deposit priority to the bankruptcy estate. This secures the UK tresaury/UK deposit guarantee system MORE refunds, and a better deal overall, than the EU Directive (without deposit priority) would have provided.

It discriminated against savers on the basis of nationality. This was after seizing assets in the UK and Netherlands that had been purchased using money belonging to UK/Dutch savers. We trusted Iceland to treat us all the same! Just means Iceland will never join the EU even if one day it wants to in order to get more of our money.

According to the judgment, Iceland did not discriminate against savers on the basis of nationality. Have you actually read the judgment? There is very little interest in joining the EU in Iceland at the moment, but if the Icelanders for some reason change their minds and decide to join, I don't think this issue will be a hindrance at all. The Icesave claims will be paid out in full by the actual debtor, the estate of the failed Landsbanki.

The UK deposit guarnatee system was always going to be liable for amounts between the 20 000 Euros and 50 000 pounds, since Landsbanki was had bought into the UK top-up guarantee.
The deposit priority, granted by the Icelandic governemnt, is securing the UK Deposit Guarantee Fund 100% of that money back, instead of just about 50% (roughly) had the deposit priority not been granted.

I can assure you that Icelanders have no intention of joining the EU in the future. Certainly the Icelandic government was wrong in discriminating against depositors by way of nationality. But all dopositors in this privately owned Icelandic bank´s Ponzy scheme should have known, that when seeking the highest possible returns, people can expect to get burnt. That is the rule of tumb in the capitalist system. We are talking about an incident happening within that system, aren´t we? The banksters are now leading protected lives, in London and Barcelona with the courtesy of the governments of the UK and Spain.

'The UK deposit guarnatee system was always going to be liable for amounts between the 20 000 Euros and 50 000 pounds,'

No it wasn't. The accounts were under Icelandic guarantee, not the UK and under the EEA passporting scheme were given the same cover as accounts in Iceland.
Iceland gave a gaurantee then reneged on it.

You write as if the Icelandic government gave the British and Dutch something, whereas they were actually cheating the non-deposit Landsbanki creditors - eg who bought bonds in good faith that Icelandic law made them rank pari passu with depositors in any Landsbanki bankruptcy liquidation. The Emergency Law that gives depositors priority was passed on the eve of Landsbanki's bankruptcy in the knowledge of what was about to happen, so it must be liable to challenge as an ex post facto law.

Nothing odd about this ruling going in Icelands favour. Just shows the bias the English media, including Economist, but excluding FT, have shown in this matter. Classic imperial behaviour. But Iceland has won England yet again with justice on its side (remember the cod wars).

Banks have no guarantee for being bailed out when in trouble, and in financial crisis countries don't have to bail out the rest of European bankers like Ireland did.

England should be sued for compensation by Iceland for its typical bullying imperial tactics in the Icesave saga.

What do you mean by "Iceland's theft"? The UK and Dutch governments compensated the savers immediately and acquired a claim on the Icelandic bank, which is paying back the entire debt. Such a good result for the UK and the Netherlands would not have happened but for the Icelandic government's intervention to give depositors priority.

@Omricon: So you think if someone makes a bad investment decision and is not bailed out by the public that is theft? I always though that's what capitalism was all about! Well, I guess what I've been taught about capitalism is only valid as long as those doing the teaching are on the winning side, if they loose they prefer socialism. Clever!

The court, and hence its ruling, is a joke. Its judges are drawn from Liechtenstein, Iceland and Norway. Since you mention the cod wars, the situation is like having a court drawn from Spain, Britain and Germany ruling on Iceland's fishing limits.

A recital to the verdict:
"200 Moreover, as regards the second plea, the defendant argues that there has been no
discrimination whatsoever in the manner in which the deposit-guarantee fund
itself has operated. The two groups compared by ESA, depositors with domestic
branches and depositors with foreign branches of Landsbanki, have been treated
equally. None has received any payments under the guarantee scheme."

That ruling is a joke. The court argued that because the transfer of domestic deposits to a new state-owned bank had been made before the Icelandic bank regulators had formally declared Landsbanki deposits unavailable on October 27, 2008, the domestic depositors had never been in a position to need deposit insurance. This was despite the fact that the court acknowledged that Landsbanki collapsed on October 7 and the decision to transfer domestic deposits was made on the October 9, under an "Emergency Act" passed by the Icelandic parliament on the October 6, by which time the failure of Landsbanki was inevitable, meaning that the deposit transfers were plainly ex post facto.